European Union Legislation and Procurement Reform (Scotland) Act 2014: reference pack

2. Strategic and Sustainable Procurement

Principles of Procurement

Public bodies are required to design their procurements in such a way as to follow the principles which derive from the Treaty of the Functioning of the European Union,
and which form part of the General Duty under the Procurement Reform (Scotland) Act 2014:

• Equal Treatment
• Non-Discrimination
• Transparency
• Proportionality

Public bodies must be careful that the design of their procurement does not have the effect of creating barriers to competition. For example, it is not permissible to require high insurance levels or turnover limits which cannot be justified and which artificially narrow the market. Public bodies must not disaggregate a procurement with the intention that it falls below the relevant advertising thresholds and the application of the legislation.

Scotland’s National Performance Framework

To facilitate progress in sustainable procurement, the National Performance Framework ^[6] is at the heart of the process. This is the single framework to which all public services in Scotland are aligned.

What is it?

Introduced in 2007, the National Performance Framework ( NPF) sets out a vision for national wellbeing in Scotland and measures achievement in relation to this. The NPF provides a framework for collaboration across the whole spectrum of Scotland’s civic society, including public and private sectors, voluntary organisations, businesses and communities. It is based on delivering outcomes that improve the quality of life for the people of Scotland.

Following the introduction of the Community Empowerment (Scotland) Act 2015, Scottish Ministers have a duty to consult on, develop and publish a new set of National Outcomes for Scotland and to review them at least every five years. The recent review of the NPF was undertaken in response to this legislation.

The review aimed to identify a set of National Outcomes which better reflects the values and aspirations of the public, expert stakeholders and Ministers, and also improves alignment with the UN’s Sustainable Development Goals and other frameworks, such as Scotland’s Economic Strategy. It also aimed to simplify the language and look of the framework, and will allow better tracking of progress in reducing inequalities, promoting equality, and encouraging preventative approaches.

A wide range of indicators are used to assess progress towards the Purpose and National Outcomes. These provide a broad measure of national wellbeing, incorporating a range of economic, social and environmental indicators. Performance is reported on the National Performance website.

Reform Act: Organisational Procurement Strategy

A procurement strategy is required to cover a public body’s financial year if the sum
of the estimated values of their contracts is equal to or greater than £5,000,000.

Public bodies are not required to prepare a procurement strategy relating to any period before 31 ^st December 2016. Public bodies needed to produce their first procurement strategy by 31 ^st December 2016. This first strategy covers, as a minimum, the remainder of that financial year and the first full financial year starting after
31 ^st December 2016.

It is possible for two or more contracting authorities to prepare a joint procurement strategy which covers their collective interests.

Procurement strategies must also be reviewed and revisions made as considered appropriate. Procurement strategies must, as a minimum, be made publicly available on the internet and also in such manner as it is considered appropriate.

Organisational Procurement Strategy

What must a procurement strategy include?

It must set out how the public body’s regulated procurements will:

• contribute to the carrying out of the public body’s functions;
• deliver value for money, and;
• be in compliance with the Reform Act’s General Duty and Sustainable Procurement Duty.

For the purposes of the Procurement Reform (Scotland) Act 2014 and the Procurement (Scotland) Regulations 2016:

• A “regulated procurement” is any procedure carried out by a public body in relation to the award of a regulated contract.
• A “regulated contract” is a public contract which is not excluded and which equals or exceeds the £50,000 threshold for supplies and services and the £2,000,000 threshold for works.

The strategy must also include the public body’s general policy:

• on the use of community benefit requirements;
• on consulting and engaging with those affected by its procurements;
• on the payment of a living wage to persons involved in regulated procurements;
• on promoting compliance with the Health and Safety at Work etc. Act 1974;
• on the procurement of fairly and ethically traded goods and services;
• in respect of contracts involving the provision of food;

a) how it will improve the health, wellbeing and education of communities in their area, and;

b) promote the highest standards of animal welfare;

• ensuring prompt payment (within 30 days) of invoices for public contracts.

Annual Procurement Reports

Annual procurement reports must be published as a minimum on the internet and any other location the public body chooses, and must contain:

• A reflection looking back on the procurement activity over the financial year, including:

a) a summary of the regulated procurements in the year,

b) a review of how the regulated procurements complied with the procurement strategy, and where they don’t,

c) a statement of how it will ensure compliance in future regulated procurements,

d) a summary of any community benefit requirements fulfilled during the year,

e) a summary of steps taken to facilitate the involvement of supported businesses in regulated procurements during the year covered by the report,

f) a summary of the regulated procurements the authority expects to commence in the next two financial years.

• Through legislative change, Scottish Ministers can require annual reports to include further information.

Upon publication of a public body’s annual procurement report, the public body must notify the Scottish Ministers of this.

Contracts Register

To improve the transparency of a public body’s procurement activity, there is now a requirement to keep and maintain a register of contracts which have been awarded as a result of a regulated procurement.

Contracts which must be included are the award of a public contract, the establishment of a framework agreement and the award of a call off contract under a framework agreement.

As a minimum, public bodies must make it publicly available on the internet and by such other means as it considers appropriate. Publication of contract award notices via PCS will help facilitate capture of the data required by public bodies to populate their register.

The contract register must include the following details on each contract:

• the date of the award,
• the name of the contractor,
• the subject matter,
• the estimated value of the contract,
• the start date,
• the end date provided for in the contract, or the circumstances in which the contract will end, and
• the duration of any extension period.

Sustainable Procurement Duty

To ensure public spend achieves value for money and contributes to national and local outcomes and the public body’s priorities, early consideration of how to frame requirements is necessary. The sustainable procurement duty applies to all regulated procurements.

Public bodies are now required to consider before they carry out a regulated procurement, which commences on or after 1 ^st June 2016, how they can conduct the procurement and act with a view to securing improvements in a way which will:

• secure improvements to the economic, social and environmental wellbeing ^[7] of the authority’s area ^[8]
• facilitate the involvement of SMEs, third sector bodies and supported businesses; and
• promote innovation.

Scottish Ministers have published statutory guidance on the Sustainable Procurement Duty which can be accessed on the Scottish Government website ^[9] .

Reserved Contracts for Supported Businesses

Participation in any EU, concessions or Reform Act regulated procurement may be reserved by public bodies for:

• organisations that are Supported Businesses
• suppliers who operate an employment programme, the main aim of which is the social and professional integration of disabled or disadvantaged persons or may provide for this to be performed in the context of supported employment programmes.

In all cases the reservation is only available to economic operators where at least 30% of their workforce is disabled or disadvantaged, previously 50% of the workforce had to be disabled. Please note that supported businesses are defined in a way that would include business units within a larger organisation providing that the business unit meets the definition in the Regulations. Specific programmes meeting the definition may also qualify.

When advertising in the OJEU and/or Public Contracts Scotland, public bodies must make it clear that their opportunity is a reserved contract or concession. Reserving contracts is a good way of using public money to help people who might find it more difficult to gain employment through the open labour market.

Social and Environmental Considerations (including Community Benefits)

The ability to incorporate social and environmental considerations (including community benefits) in EU procurements is not new, though there are developments which offer further clarification regarding their use. For example:

• these may include economic, innovation-related, environmental, social or employment-related considerations;
• there is new codification of case law, which confirms that social and environmental considerations may form part of the award criteria;
• there is new codification of case law, which confirms that permitted factors
  for technical specifications need not relate to material substance
  (of, for example, a product).

The key principles remain that:

• social and environment considerations must relate to the subject matter of the
  contract;
• the use of social and environmental considerations must adhere to principles of procurement; and
• if scoring, social and environmental criteria must be capable of objective assessment.

Community Benefit requirements in major contracts

Community benefits can contribute to a range of national and local outcomes relating to employability, skills and reducing inequality.

In any procurement equal to or greater than £4,000,000, which commence on or after 1 ^st June 2016, public bodies must consider whether to impose community benefit requirements as part of the procurement. This £4,000,000 threshold will be subject to review.

For regulated procurements which are equal to or greater than £4,000,000, the contract notice must include the following:

a) a summary of the community benefit requirements that will be included in the contract, or

b) where the public body does not intend to include any such requirements, a statement of its reasons for not including any requirements.

Where community benefits are included in a regulated procurement, the public body must include in the award notice a statement of the benefits it considers will be derived from those requirements. Scottish Ministers have published statutory guidance on community benefit requirements ^[10] .

QUIZ

Question 4

In which of the following scenarios may a contract be reserved for supported businesses? (please select one answer):

a) Where at least 50% of the workforce are disabled

b) Where at least 30% of the workforce are disabled

c) Where at least 30% of the workforce are disadvantaged or disabled

d) Where at least 50% of the workforce are disadvantaged of disabled.